Hello Friends,
Our Investment Committee met recently to review the economy, markets, and investment model performance. Though there have been some recent concerning news headlines, many are cheering that the S&P 500 is on track for a third straight year of double-digit gains.[1] It has not been a straight line of growth this year; we did have a volatile March and April due to tariff announcements. We noted that we have made more tactical trades this year than normal - first, to reduce risk at the front end of the tariff announcements, and then to increase risk and add investments to technology and international markets as the markets recovered. Then, in August, we made trades prior to the government shutdown to raise extra cash for our clients that take needed withdrawals. It has been a roller-coaster ride, but as we enter the final month of the year, we feel good about our current path. We are hopeful for a Santa Claus rally to finish off 2025...no guarantees.
We do have some growing concerns about inflation, rising unemployment, lower consumer spending, and the change in leadership at the Federal Reserve. From a historical perspective, the second year of a four-year presidential cycle in the US is often a negative year in the markets.[2] 2026 is year two for President Trump.
In December, for some clients, we will make trades to harvest tax losses; otherwise, we have no other planned model portfolio changes through year end. Though we remain hopeful for a strong finish to 2025, we do have plans to rebalance client accounts and reduce risk in our model portfolios in the first couple weeks of January 2026. We hope to protect some of the "winnings" from this positive year in the markets. As always, we will continue to monitor economic and market conditions closely and adjust these plans if needed to keep your portfolio aligned with your goals.
Here are some interesting quotes, both good and bad:
- "Third quarter earnings season was very strong - exceeding expectations and setting the stage for a year-end rally. My year end target for the S&P 500 remains at 7,000"[3]
- "Things are pretty crappy. 1 in 4 US households are living paycheck to paycheck”[7]
- "Opportunity is created when stock prices fall while EPS estimate trends improve. That is the environment today. Remain patient as stock prices should resume higher once unjustified fears fade"[5]
- "US companies step up job cuts amid uncertain economy”[6]
- "The next two weeks could be choppy, before giving way to a rebound. We are forecasting the S&P 500 could reach 7,000 by year-end"[4]
Keep the faith, friends. Have a Happy Thanksgiving! Let us know if we can answer any questions about your financial plan or investment strategy.
Sincerely,
Your PFA Investment Committee
[1] morganstanley.com
[2] marketwatch.com
[3] chaikinanalytics.com
[4] fsinsight.com
[5] earningsscout.com
[6] reuters.com
[7] CNN.com